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Wednesday, February 27, 2013

Fed in a $500B Pickle & why Billionaires are fleeing US markets

Since our last post where we celebrated the Italian elections for at least temporarily causing the market to drop, its gone up again as we fully expected it to..

The news says it was due to housing and confidence in Bernanke..

Uncle Ben says the Fed is not engaged in a currency war..

Shame we don't put people prison for life with no parole for lying...

What-ever..

The Fed is right now a swollen teat squirting out an endless supply of "free" milk and the rats will continue to fatten their dirty lil' bellies to the last drop, no matter the realities of this country or the rest of the global economy.

The corporate media can't say that so instead they attach a rising market to a bunch of lies and sell it as 'recovery'
We did find an interesting tidbit of info yesterday afternoon via Bloomberg which we're sure most people missed...

When Uncle Ben keeps interest rates at near zero to kill responsible savers and encourage everyday people to incur further debt, so the banks can have super-cheap money to invest in the stock market with...  well, he's keeping it low for a prolonged period for another reason..

"Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels."

That's over $500,000,000,000  ...  in losses
"That sum is the difference between the value of securities in the Fed’s portfolio on Dec. 31 and what they may fetch in three years, according to data compiled by MSCI Inc...

MSCI sees the market value of Fed holdings shrinking by $547 billion over three years under an adverse scenario that includes an economic contraction and rising inflation.

The potential losses are unprecedented in the Fed’s 100- year history."

So when you hear all this nonsense about long term low interest rates and indefinite QE because they want to see unemployment go down to under 6.5%, etc...  No..  its not that..

Its called mark-to-market, the event everyone in Wall St have been avoiding at all costs for many years where homes, stocks, etc are given accurate valuations based on reality, not conjecture, and many many Big & Powerful entities will take on sizable losses when it occurs.
Yes, the Fed is in quite a pickle thanks to its irresponsibility and doesn't know how the hell to get out without sustaining sizable losses over a very short period of time.

But people will say.. 'Oh, what do you know at A&G?!  I put my trust in CNBC and Jim Cramer and established media outlets,etc..'

Sure.. what do we know?

So let's find out what the billionaires are thinking & doing...

"Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast." (MoneyNews)
Oh that doesn't look good... please tell us more.. Why, certainly...

Let's start with Warren Buffett.. the "Oracle"

"In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel."

Interesting, you say...
What about fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown?  He's clearing out of U.S. stocks too.

"During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee."

How about George Soros?

"Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares."

So why are they doing this?
After all, the stock market is still in the midst of its supposed historic rally. And we've been told endlessly that real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And how about the publicly accepted lie that the unemployment rate seems to have stabilized.

Professional investors are aware of specific research that points toward a massive market correction.  One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock...

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book 'America’s Bubble Economy'."

His reasoning as to why a large drop of some sort is a virtual certainty which starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.
From MoneyNews: "“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.

“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems...

“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”"

Maybe he.. the billionaires.. maybe we're all wrong..

To our friends, we only want to protect you.. no other agenda.

And to those we don't like -- Please keep investing..